Wednesday, June 20, 2007


I love to stare at maps. I find them fascinating. If you stare at them long enough, you start seeing some interesting things. For example, we think of Minneapolis/St. Paul as a very cold and northerly location. However, when you look at the same latitude as Minneapolis in Europe, you end up in the south of France, a place we do not usually think of as cold and northerly. Yet, the fact is that Minneapolis is about the same distance from the North Pole at Southern France.

Detroit, Chicago and Boston are also thought of as being relatively cold and northerly. Yet they are about as close to the equator as places like Rome, Italy and Barcelona, Spain in the heart of the Mediterranean Sea. Not exactly the same climate zone, even though the same latitude.

And what about our friend London, England? Well, if you take the same latitude as London and come over to North America, you end up on the north shore of Ontario, Canada in James Bay, about 1,100 miles north of Toronto. Sure, London can get cold, but nothing like James Bay.

So if someone tells you to pack your bags for a vacation, and the only thing they tell you is the latitude of your destination, you really don’t know very much. You have no idea what clothes are appropriate to bring.

There’s a reason why you can have so many different climate zones at the same latitude. Climate is determined by more than one’s distance from the equator. Not only do you have to consider latitude, but you also have to consider altitude. And, more importantly, one has to take into account climate changers like ocean currents. Northern Europe is kept warm due to the Atlantic Meridonal Overturning Current, otherwise known as the Atlantic Conveyor.

The Atlantic Conveyor works to warm Northern Europe in two ways. First, it brings warm water from the Gulf of Mexico to Northern Europe. Second, it promotes “chimneys” in the ocean which push the coldest water straight down to the ocean bottom so that the warmer water stays closer to the surface. These factors are estimated to account for 10 to 15 degrees Fahrenheit of additional warmth for Northern Europe. The difference between 50 degrees Fahrenheit and 75 degrees is certainly enough to change your wardrobe.

In Southern Europe, Mediterranean Sea currents help keep coastal areas warm. Northerly winds off the Mediterranean even help to keep Germany warmer than it would otherwise be.

What makes this so deceptive is that all the warmth-providing activity is taking place below the surface. You cannot really see it with the naked eye. It is happening deep in the oceans and seas, and requires thousands of miles of territory in order to measure the full impact.

The latitude is something that is easy to measure. You can quickly look up any city in an atlas and get its latitude (or even faster on the internet). The impact of complex ocean currents gets a bit more complicated.

This same principle can hold true in the business world. We like to make strategic decisions based on facts. In this day and age, it is easy to get overloaded with a lot of facts. All of these facts can lull us into a sense of confidence about our decision-making. However, if you just look at the surface facts, you can come to some wrong conclusions, just like you can come to the wrong conclusions about climate from just looking at latitudes.

To get a complete picture of a market, one needs to find those undercurrents which are not immediately discernable on the surface, yet have a major impact on customer behavior. A business climate can be as complex as a weather climate. Your chances of bringing the right baggage for the job will require looking for those hidden factors which influence behavior.

The principle here is that just because two groups of customers may share vary similar demographic characteristics, it does not necessarily mean that they will react the same way to your strategy.

Think of DNA, a measurable trait. A human and a chimpanzee have nearly identical DNA, yet I think that if you marketed to chimpanzees the same way as you do to humans, you would not get the same results. The same is true on other measurable traits.

We can see this in a demographic factor like ethnicity. Just because someone is a Hispanic in the United States does not mean that they behave the same way or can be appealed to in the same way. Some of these differences are due to factors thousands of miles away, just like the impact of the Gulf of Mexico on England’s climate. For example, if a Hispanic immigrated to the US from Puerto Rico, they will have different characteristics from a Hispanic originally from Mexico, because the Hispanics bring a bit of their culture of origin with them to the US.

Another major impact is time. A third generation Hispanic in the US is typically not very different from mainstream Americans, whereas a first generation Hispanic acts very differently. One has to dig a little deeper below the surface to segregate Hispanics by generation in the US.

If one looks globally at a factor like household income, one can see vastly different standards of living, even though the amount of money earned is about the same. “Middle Class” behavior often has only a tangential relationship to income, just like temperature is only tangentially related to latitude.

I remember over a decade ago when Marsh Supermarkets, out of Indianapolis, Indiana decided to build a large supermarket in India. The “facts” seemed to show a rising percentage of households in India with incomes large enough to afford the benefits of supermarket shopping. Based on facts like this, they built a store in India. It was an utter disaster.

What Marsh discovered was that the due to a different labor market than in the US, the people in India who could afford to shop at supermarkets could also afford cheap labor to do their grocery shopping for them. These shoppers preferred to patronize the small independent shops, because these shopkeepers were their friends and were more in tune with the culture of these hired hands. Hence, the culture of the hired hands was more important than the affluence of the family who hired them when it came to choosing where to purchase groceries. I guess that even though Indianapolis starts with the word “India,” that does not make you an expert on the nuances of Indian culture.

Recently, the Wall Street Journal wrote an article on the fact that Disney has finally decided to no longer go it alone when entering cultures different from the US. They are forming partnerships with local companies who know the undercurrents of the local culture. In India, Disney formed a partnership with Yash Raj Films, a local family-oriented film company in the Bollywood tradition.

To quote the Wall Street Journal,
“Disney's traditional approach was largely to force-feed its U.S. products from its Burbank, Calif., headquarters. The company ultimately concluded the cookie-cutter approach wouldn't work, and now it is going country by country, with a particular focus on five hot markets: India, China, Russia, Latin America and South Korea. ‘We're building Disney from scratch,’ in countries such as India, said Mr. Iger, citing the company's founder and namesake: Just ‘as Walt did in the U.S. over 50 years ago.’"

Surface statistics, like latitude or demographics, only tell part of the story and can lead to wrong strategic conclusions. Often, underlying currents of culture and history can have a greater impact than the surface statistics. It pays to dig a little deeper under the surface (or find people who are already intimate with these undercurrents).

Just knowing the distance from the equator can be very misleading about climate if you do not differentiate between miles north versus miles south. The Northern Hemisphere has opposite seasons from the Southern Hemisphere. Now that would really throw off your ability to pack the right clothing.

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